Leveraged Public to Private Transactions in the UK
48 Pages Posted: 19 Apr 2005
Date Written: April 2005
This paper examines the magnitude and the sources of the expected shareholder gains in UK public to private transactions (PTPs) in the second wave from 1997-2003. Pre-transaction shareholders on average receive a premium of 40% and the share price reaction to the PTP announcement is about 30%. The main sources of the shareholder wealth gains are undervaluation of the pre-transaction target firm, increased interest tax shields and incentive realignment. An expected reduction of free cash flows does not determine the premiums nor are PTPs a defensive reaction against a takeover.
Keywords: Public to private, going-private, LBO, MBO, IBO, Management buyins, Management buyouts,Leveraged buyouts
JEL Classification: G34, G32
Suggested Citation: Suggested Citation